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Global recession to slow Riau’s economic growth, says BI

Bank Indonesia (BI) predicts that Riau’s economic growth will slow due to the impact of the global recession, starting from the second quarter of 2014.

“We predict that Riau’s economic growth will be lower than projected. Thus, we will revise the growth forecast for the province,” BI Riau chapter deputy director Abdul Majid Ikram said as quoted by Antara news agency in Pekanbaru on Sunday.

Earlier, the central bank was confident that Riau’s economic growth in this year’s second quarter would be more stable than in the first, which was recorded to have grown by 4.34 percent, by incorporating oil and gas components.

BI predicted that Riau’s economic growth projection figure would annually stand between 3.71 and 4.71 percent in the second quarter.

By excluding oil and gas components, the province’s economic growth was predicted to be relatively stable, staying within 6.47 and 7.48 percent year-on-year (y-o-y).

“Now, we predict that economic growth will be lower than projected, with or without oil and gas components,” said Abdul.

He said the short-term economic condition had been helped by the July 9 presidential election that ran smoothly. This could be seen from investors’ responses, which triggered increases of indexes in the capital market. The rupiah exchange rate also slightly improved.

“However, we are still waiting for the response of the US government on whether it will relax its monetary policy, following the decline of China’s economic growth,” said Abdul.

He went on to say that the government and BI had started to anticipate the global recession, which would affect domestic trade and economic growth.

Abdul said Riau would likely suffer from the global recession as the world market’s demand in prime commodities such as crude oil, rubber and crude palm oil (CPO) would decline. He added that Riau was still dependent on raw material exports while its competitiveness remained low.